An issue has recently been brought to my attention that users with Contribute access to a Document Library cannot actually Edit/Delete items. Whenever users go to Edit a document they get an Access Denied error although they do in fact have the correct permissions.

I understand that on a List you have to change Item-Level Permissions to allow you to Edit/Delete All files (not just your own), but I do not see this option for Libraries.

There is no such setting for libraries, that setting is only for lists.

I would first check to see if the file itself was uninherited from the parent permission level, it could be that they do not have access to modify that specific file. Use the drop-down menu on that file to go to "Manage Permissions" to look.

I would next check the permission levels to see if anything changed for them. They could have a corrupt or otherwise modified permission level that only allows additions (I'm assuming that's all they can do).

Also, I would look at the masterpage or layout to see if anything is modified incorrectly. Earlier in the year I had been getting access denied pages because I a modified masterpage that I found out was invalid.